My SO and I have done quite well financially and have a lot of taxable investments, not enough 401k room. Weíre in a very high tax state, so marginal tax rate on qualified dividends is ~35%, interest income is close to 50%.Our parents are both basically poor immigrants. My parents are at 0% but in Canada (15%+ withholding on dividends from US ETFs). My SOís parents are 0% on dividends, 12% on income, but 6% state tax. We both have very good relationships with our parents. How crazy would it be to gift significant $ to them and essentially invest in their name for lower taxes, and get it back on inheritance? In the US, there is an additional perk of step-up cost basis on inheritance!

I am not a lawyer or an accountant, but you aren't actually giving them this money. It isn't there's to do with as they see fit. Therefore, it is basically your account, in their name in order to avoid taxes. I'm not sure how that wouldn't be tax fraud.

I see nothing wrong with a bona fide gift, where your parents would be absolutely free to spend this money with no restrictions, written or otherwise. If they happen to not use the money and end up transferring it back to you in their will, so be it. Nothing wrong with that.

Where it becomes questionable is if it's a "gift" in name only, where the account is primarily under your control and your parents feel obligated not to spend the money because it's not really theirs.

... you aren't actually giving them this money. It isn't there's to do with as they see fit.

That isn't what the OP said. I agree that, if this is the case, it would not be legal. But people are allowed to gift money to other people.

Yes, but if there is a clear expectation of what they will do with the money and they in effect aren't allowed to control or use it, then it isn't actually a gift. he'd be "giving" it to them with an expectation that they don't touch it (so it is saved for him) and presumably with him actually controlling where it is invested. That is not a gift. It's "here, hold this for me for a moment".

... you aren't actually giving them this money. It isn't there's to do with as they see fit.

That isn't what the OP said. I agree that, if this is the case, it would not be legal. But people are allowed to gift money to other people.

Yes, but if there is a clear expectation of what they will do with the money and they in effect aren't allowed to control or use it, then it isn't actually a gift. he'd be "giving" it to them with an expectation that they don't touch it (so it is saved for him) and presumably with him actually controlling where it is invested. That is not a gift. It's "here, hold this for me for a moment".

And if the parents decide "hey, the four of us should get together for a 'round the world cruise using this money our kids gave us" then what happens?

Legality aside, that sounds like a recipe for disaster. You're giving money to people who have never had any. How will you navigate means-tested programs, general liability questions, and the onset of dementia?

Legally, this sounds iffy. Before you actually do it, I'd find an accountant/lawyer who is familiar with all the tax loopholes the super rich use. Practically, I agree with Paul. There's so much that could go wrong.

You might also look into tax advantaged muni bonds. Or you know, just pay your taxes in recognition of the fact that you're part of society and have received a lot of benefits from that society, whether directly or indirectly.

As long as the cash gifted to them and properly documented on the gift tax form, I don't see a problem with this. Of course, for you to get the money back (i.e., not as inheritance), they'd need to gift it back to you. You didn't mention other folks in their wills (e.g., your siblings), but if wills are being constantly redrawn in concert with your gifts, then it is in the same legal territory as the world's oldest profession: when does being a "sugar daddy" turn into being a "john"? Now, if you're the only inheritees, then there would not need to be such redrawing, and you would get your money back through inheritance.

Something to think about is that they having cash could cause issues with means-tested benefits and lawsuit exposure. I'm a cheapskate that loves to dodge taxes, but I wouldn't do it.